2023 (8) TMI 486 - AT - Insolvency and Bankruptcy

Initiation of CIRP - Financial Debt - Period of limitation - Assignment of debt in favour of the Petitioner - documentary evidence furnished with application show that a debt is due and payable and has not been paid by the corporate debtor or not - Applicability of Section 10A of IBC - HELD THAT - In the instant case, it is an admitted fact and also recorded in the Impugned Order that as per the Settlement Agreement entered into between the Corporate Debtor and the Lenders, the third instalment of the payment was due and payable on 31.03.2020. The Hon ble Apex Court in RAMESH KYMAL VERSUS M/S SIEMENS GAMESA RENEWABLE POWER PVT LTD. 2021 (2) TMI 394 - SUPREME COURT concluded that the embargo in Section 10-A must receive a purposive construction which will advance the contention of the Learned Senior Counsel for Respondent No.2 that though the date of default is on 31.03.2020, Section 10-A will not be applicable is unsustainable in the light of the observations made by the Hon ble Apex Court in the aforenoted Judgment. In the instant case, admittedly, the date of default is 31.03.2020 and the ratio of the Hon ble Apex Court in Ramesh Kymal versus M/s. Siemens Gamesa Renewable Power Pvt. Ltd. regarding Section 10-A of the Code the object of which was sought to be achieved by enacting the Provision, is squarely applicable to the facts of this case. The Impugned Order is set aside and consequently the admission of the Section 7 Petition is also set aside Appeal allowed.

Summary

Issues Involved:
1. Legality of the assignment of debt under Section 60(5)(C) of the Insolvency and Bankruptcy Code, 2016.
2. Whether the debt is due and payable and has not been paid by the corporate debtor.

Summary:

Issue 1: Legality of the Assignment of Debt
The Adjudicating Authority assessed whether it could entertain the plea regarding the legality of the assignment of debt in favor of the petitioner under Section 60(5)(C) of the Insolvency and Bankruptcy Code, 2016. The authority referred to the Supreme Court ruling in Mobilox, emphasizing that the adjudicating authority only needs to verify if a default has occurred based on records or evidence provided by the financial creditor. The corporate debtor had admitted to availing a term loan of Rs. 60 Crores from IDFC Ltd., which was later declared a Non-Performing Asset (NPA) on 13.10.2013. The corporate debtor entered into a Settlement Agreement with EARC, which was not honored, thus admitting the financial debt.

Issue 2: Debt Due and Payable
The Adjudicating Authority found that the debt was 'due and payable' based on the same Agreement that led the Assignee Financial Creditor to move the Debts Recovery Tribunal for recovery. The corporate debtor had agreed to pay the debt in three tranches but breached the Agreement. The appellant argued that the limitation period to enforce the lenders' rights had expired, referencing prior CIRP proceedings that were set aside as time-barred by the National Company Law Appellate Tribunal and upheld by the Supreme Court.

Assessment:
The Adjudicating Authority did not consider the previous CIRP proceedings against the same Corporate Debtor, which were held to be time-barred. The main issue was whether the default date of 31.03.2020 contravened Section 10-A, which prohibits filing an application for defaults occurring between 25.03.2020 and 24.03.2021. The Supreme Court in 'Ramesh Kymal vs. M/s. Siemens Gamesa Renewable Power Pvt. Ltd.' clarified that Section 10-A applies to defaults within this period, thus barring the initiation of CIRP for defaults during this timeframe.

Conclusion:
The appeal was allowed, setting aside the Impugned Order dated 07.02.2022, and consequently, the admission of the Section 7 Petition was also set aside. The Adjudicating Authority was directed to proceed in accordance with the law, with no order as to costs.